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Tuesday, December 22, 2009

Google CEO: High Taxes Are Awesome... For Everyone Else

It's no secret that Google's Eric Schmidt is a big fan of US President Barack Obama. He campaigned for the President, has vocally supported the administration's economic plans, and has even participated in their development.

Among these economic policies are significantly higher taxes for US corporations. For example, back in May, the administration proposed increasing taxes by about $190 billion on US corporations by "closing loopholes" - including those related to offshore earnings and employment - in order to ensure that US companies "pay their fair share." (Ed. note: actual share may or may not be fair.) Now, I've written a few times on how bad such tax schemes are, so I won't rehash those arguments here. Instead, I want to focus on whether the business practices of Mr. Schmidt's company Google actually mesh with the policies that he and the Obama Administration advocate for the rest of American businesses.

Quick answer: they don't.

As it turns out, the boys at Google aren't big fans of corporate taxes afterall, and they actually utilize some of the dastardly tax "loopholes" that the White House has demonized and sought to terminate. Here's the UK's Daily Mail with the totally unshocking story:

Google avoided paying £450million in corporation tax on its £1.6billion earnings from advertising in Britain last year.

Accounts show the company paid HM Revenue and Customs only £141,519 on other earnings.

Google managed to avoid paying millions here because its European headquarters is in Dublin - and advertising earnings from customers in Britain are funnelled through to the Irish subsidiary.

Accountants say that if the £1.6billion advertising revenue stayed in Britain, it would be subject to corporation tax at 28-30 per cent rather than the 15 per cent levy in Ireland.

Google's bill would have been up to £450million.

But even the accounts for its Irish operation show a low tax bill. While Google is not accused of any wrongdoing, the tax it paid in 2008 was just £6.7million.

So while Google CEO Eric Schmidt vocally supports the White House's push for higher corporate taxes, his company is intentionally avoiding hundreds of millions of dollars in - you guessed it - corporate taxes.

So much for paying their "fair share," huh?

Now, I of course fully support low corporate taxes, international tax competition, and Google's right to find the most beneficial tax jurisdiction on the planet. But I find it a tad disingenuous for Mr. Schmidt to have a lifetime railpass on the Hopenchange Express, while Google benefits from the very economic policies that their boys in the White House loudly deplore.

Then again, considering the stance of other prominent Democrats like Tim Geithner and Charlie Rangel on the issue of taxes (catchphrase: "taxes are awesome because we don't pay 'em!"), I guess Mr. Schmidt's just toeing the party line on this issue.